q1 2009 earning report of williams companies, inc

First Quarter 2009 EarningsSteve MalcolmChairman, President & CEO

© 2009 The Williams Companies, Inc. All rights reserved. The Williams Companies, Inc. / February 1, 2009 / 11

Forward Looking Statements

Our reports, filings, and other public announcements may contain or incorporate by reference statements that do not directly or exclusively relate to historical facts. Such statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. You t i ll id tif f d l ki t t t b th f f d l ki d h “ ti i t ” b li ” “ ld ” “ ti ” “ ti t ”typically can identify forward-looking statements by the use of forward-looking words, such as “anticipate,” believe,” “could,” “continue,” “estimate,” “expect,” “forecast,” “may,” “plan,” “potential,” “project,” “schedule,” “will,” and other similar words. These statements are based on our present intentions and our assumptions about future events and are subject to risks, uncertainties, and other factors. In addition to any assumptions, risks, uncertainties or other factors referred to specifically in connection with such statements, other factors not specifically referenced could cause our actual results to differ materially from the results expressed or implied in any forward-looking statements. Those factors include, among others:

• availability of supplies (including the uncertainties inherent in assessing, estimating, acquiring and developing future natural gas reserves), market demand, volatility of prices, and the availability and cost of capital;

• inflation, interest rates, fluctuation in foreign exchange, and general economic conditions (including the current economic slowdown and the disruption of global credit markets and the impact of these events on our customers and suppliers);

• the strength and financial resources of our competitors; • development of alternative energy sources;• development of alternative energy sources; • the impact of operational and development hazards; • costs of, changes in, or the results of laws, government regulations (including proposed climate change legislation), environmental liabilities, litigation,

and rate proceedings;• our costs and funding obligations for defined benefit pension plans and other postretirement benefit plans;• changes in maintenance and construction costs;• changes in the current geopolitical situation; • risks related to strategy and financing, including restrictions stemming from our debt agreements, future changes in our credit ratings and the

availability and cost of credit;• risks associated with future weather conditions;• our exposure to the credit risks of our customers; • acts of terrorism, andacts of terrorism, and• additional risks described in our filings with the Securities and Exchange Commission.

Given the uncertainties and risk factors that could cause our actual results to differ materially from those contained in any forward-looking statement, we caution investors not to unduly rely on our forward-looking statements. In addition to causing our actual results to differ, the factors listed above may cause our intentions to change. Such changes in our intentions may also cause our results to differ. We disclaim any obligation to and do not intend to publicly update or revise any forward-looking statements or changes to our intentions, whether as a result of new information, future events or


intend to publicly update or revise any forward looking statements or changes to our intentions, whether as a result of new information, future events or otherwise.

Oil and Gas Reserves and Resource Potential Disclaimer

The SEC permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves. We have used certain terms in this presentation such as “probable” reserves and “possible” reserves and "unrisked theoretical resource estimates" that the SEC’s guidelines strictly prohibit us from including in filings with the SEC. The SEC defines proved reserves as estimated hydrocarbon quantities that geological and engineering data demonstrate with reasonable certainty to be recoverable in the future from known reservoirs under the assumed economic conditions. Probable and possible reserves are estimates of potential reserves that are made using accepted geological and engineering analytical techniques, but which are estimated with reduced levels of certainty than for proved reserves. Generally under such techniques, probable reserve estimates are more than 50% certain and possible reserve estimates are less than 50% but more than 10% certain. Unrisked theoretical resource estimates are even less certain than those for possible reserves and are not risk adjusted. Unrisked theoretical resource estimates includeresource estimates are even less certain than those for possible reserves and are not risk adjusted. Unrisked theoretical resource estimates include (i) an estimate of hydrocarbon quantities for new areas for which we do not have sufficient information to date to classify the resources as probable or even possible reserves and (ii) the amount by which we have reduced our probable and possible reserves for existing areas to take into account the reduced level of certainty of recovery of the resources. Unlike probable and possible reserves, unrisked theoretical resource estimates do not take into account the uncertainty of resource recovery and are therefore not indicative of the expected future recovery and should not be relied upon.

Reference to “Resource Potential” includes proved, probable and possible reserves as well as unrisked theoretical resource estimates that might never be recoverable and are contingent on exploration success, technical improvements in drilling access, commerciality and other factors. Investors are urged to closely consider the disclosures and risk factors in our annual report on Form 10-K filed with the Securities and Exchange Commission on Feb. 25, 2009, and our quarterly reports on Form 10-Q available from our offices or from our website at www.williams.com.


Recession knocks down 1Q profitability

Dramatically lower energy commodity prices drive lowery gy y padjusted EPS

• $0.22 adjusted EPS is 61% below year-ago level$ j y g

• Average net realized price for U.S. production was 36% lower at $4.21/Mcfe

• Per-unit NGL margins dropped 69% from year-ago

S bl d i d h fl f G Pi liStable, steady earnings and cash flows from Gas Pipeline, our business most insulated from commodity prices


1st quarter financial results

1QDollars in millions, except per-share amounts 2009 2008Income (loss) from Continuing Operations: $(165) $416Operations: ( )

Income (loss) from Discontinued Operations: (7) 84

Net Income (loss) (172) 500

Net Income (loss) /Share (Diluted EPS) $(0.30) $0.84

Recurring Income from Continuing Operations/Share $0.18 $0.57

Recurring Income from Continuing $0 22 $0 57Recurring Income from Continuing Ops. after MTM Adjustments/Share $0.22 $0.57

Note: All amounts are attributable to Williams A more detailed schedule reconciling income from continuing operations to recurring income from continuing


Note: All amounts are attributable to Williams. A more detailed schedule reconciling income from continuing operations to recurring income from continuing operations after mark-to-market adjustments is available on the Williams’ Web site at www.williams.com and at the end of this presentation. Per-share amounts are presented on a fully diluted basis.

1st quarter segment profit (loss)

Reported Recurring

Dollars in millions, except per-share amounts 2009 2008 2009 2008Exploration & Production $78 $430 $117 $312

Midstream Gas & Liquids (291) 261 81 261

Gas Pipeline 179 180 179 180

Subtotal $(34) $871 $377 $753

Gas Marketing Services (2) 21 (2) 21

Other 1 1 1 1Other 1 1 1 1

Total Segment Profit (loss) $(35) $893 $376 $775

MTM Adjustments for Gas Marketing 36 (3)Services

Segment Profit after MTM Adjustments $412 $772

Memo:


Gas Marketing Services after MTM Adj. $34 $18

Successfully executing strategy in recession

Making significant progressMaking significant progress• Entered Marcellus Shale play• Announced plans to expand Canadian operations with new NGL pipeline• Increased excess liquidity with $600 million debt issueIncreased excess liquidity with $600 million debt issue• Demonstrated add’l support for Williams Partners LP• Produced 4% more gas in U.S. vs. last quarter• Received approval to expand our Northwest system to transport add’l Piceance gas• Received approval to expand our Northwest system to transport add l Piceance gas• Continued progress toward bringing strategic infrastructure projects into service

Economic environment is far from last year’s super-charged energy-commodity markets• Energy commodity prices show little strength

– Crude prices were down 56% from robust year-ago levelsCrude prices were down 56% from robust year ago levels

– Natural gas spot was off 47% from year-ago

– Williams’ 1Q ’09 average net realized price for U.S. E&P production was off 36%from 1Q ’08 level


o Q 08 e e• Industrial demand reflects reduced level of business activity, manufacturing

Entering Marcellus Shale with Midstream JV

Sweet spot of basin

JV with Atlas Pipeline Partners for gathering position

$102 million cash; $25.5 million note payable

Expect strong after-tax treturn

550k-acre dedication

Rapid-growth potential –p g p’09 volumes are up 30% from ’08 level

Substantial opportunity to i th dservice other producers

in the future with large scale, highly reliable systems


Base business anchors new NGL pipeline

Low-risk investment Fort McMurray

Suncor agreement support

Utilizes WMB international

Fort McMurray Extraction Plant

Liquidscash reserves

261-mile NGL pipeline from Fort McMurray to Redwater

Liquids Pipeline

Fort McMurray to Redwater Fractionator

125k b/d capacity vs. Williams’ current production

Redwater FractionatorWilliams current production

of 14k b/d

Provides capacity for growth in the oil sands area

$283 million total capital; most spending in


most spending in2011-12

Commodity Price Assumptions & Financial Impacts

2009 Assumption(April 30 2009)

2009 Assumption(Feb 19 2009)

2008Actuals

Crude Oil1 $104.34

(April 30, 2009) (Feb. 19, 2009) Actuals

$40.00 – $60.00

$4 50 $6 00

$45.00 – $60.00

Natural Gas1

Crude to Gas Ratio1

$9.03

11.6x

$4.50 – $6.00

8.9x – 10.0x

$4.00 – $5.00

11.3x – 12.0x

Average NGL Margins2

CapEx & Investments3

$0.61

$3,586

$0.22 – $0.35

$2,150 – $2,450

$0.23 – $0.38

$2,250 – $2,550

Recurring Segment Profit4

Diluted EPS4

$2,819

$2.15

$1,350 – $1,925

$0.60 – $1.10

$1,325 – $1,850

$0.55 – $0.95

© 2009 The Williams Companies, Inc. All rights reserved. The Williams Companies, Inc. / February 1, 2009 /10

Notes: 2008 actual commodity prices reflect an average of futures contracts settlement prices. 1Oil = WTI and Natural Gas = Henry Hub. 2Dollars per gallon. 3Dollars in millions and includes purchases of investments. 4Amounts attributable to Williams; recurring; and adjusted to remove the effect of mark-to-market accounting.

Continuing to execute on our 2009 priorities

Maintaining strong balance sheet and liquidityLiquidity – $600 million added in March through debt offeringInvestment-grade credit rating – agencies removed negative watch

Driving down costs through rigorous execution and expenseDriving down costs through rigorous execution and expense discipline

Seeing rapid drop in many operating costs

B i i k i f t t j t li i ’09 ’10Bringing key infrastructure projects online in ’09 -’10• Total investment of $1.6 billion; annual expected segment profit contribution is $250 million*• Midstream – Willow Creek, Paradox, Blind Faith, Perdido Norte• G Pi li S ti l C l d H b• Gas Pipeline – Sentinel, Colorado Hub

Right-sizing capital spendingCut ’09 spending to $2.4 billion*; primary reduction is in commodity-sensitive businessRetain flexibility

Seizing opportunities• Consistent with focus on spending discipline and financial strength


Consistent with focus on spending discipline and financial strengthGeographic diversity – strategic Midstream acquisition moves us into Marcellus Shale

*Midpoint of guidance.

Strength and stability

Strong financial position• $3.067 billion of liquidity as of April 28• Investment-grade credit rating• No significant debt maturities until 2011; primary credit facilities don’t expire until

2012 d 20132012 and 2013 • Flexibility to adjust capital spending further in response to market conditions• Our business and capex strategies are built on foundation of continued financial

strengthstrength

Stable foundation of cash flows• Integrated structure best suited to capture value in today’s challenging market and in

recoveryrecovery• Significant business insulated from market prices, economic conditions• Gas Pipeline and fee-based Midstream businesses are key cash-generators• Expect $1 2 billion – $1 4 billion cash flows* in ’09 from price risk-insulated business;Expect $1.2 billion $1.4 billion cash flows in 09 from price risk insulated business;

additionally 62% of E&P production revenue is hedged• ’09 capital budget and dividend requirement fully funded from operating cash flow and

cash on hand


• ’10 capital budget and dividend requirement expected to be fully funded from operating cash flow

*Segment profit plus DD&A.

Built on a strong foundation

Well-positioned to weather the economic storm• Strong financial position• Stable foundation of cash flows• Ability to adjust spending• Integrated model best suited for success

Substantial upside to current valuation• Market recovery and more normal commodity prices will drive value accretion across• Market recovery and more normal commodity prices will drive value accretion across

our asset base• Significant expansion projects coming online• Substantial probable and potential low risk reserves• Substantial probable and potential low-risk reserves • Expect expansion of valuation multiple as financial markets improve

Attractive risk / reward balance• Foundation of low-risk, cash-generating businesses• Upside as commodity prices return to normal levels• Disciplined investment process


p p• Track record of disciplined execution of value-driving initiatives

Non-GAAP Reconciliations


Non-GAAP Disclaimer

This presentation includes certain financial measures, recurring earnings and recurring segment profit, that are non-GAAP financial measures as defined under the rules of the Securities and Exchange Commission Recurring earnings exclude items of income ormeasures as defined under the rules of the Securities and Exchange Commission. Recurring earnings exclude items of income or loss that the company characterizes as unrepresentative of its ongoing operations. Recurring earnings and recurring segment profit provide investors meaningful insight into the Company’s results from ongoing operations. This presentation is accompanied by a reconciliation of these non-GAAP financial measures to their nearest GAAP financial measures. Management uses these financial measures because they are widely accepted financial indicators used by investors to compare company performance. In addition,management believes that these measures provide investors an enhanced perspective of the operating performance of themanagement believes that these measures provide investors an enhanced perspective of the operating performance of the Company’s assets and the cash that the business is generating. Neither recurring earnings and recurring segment profit are intended to represent cash flows for the period, nor are they presented as an alternative to net income or cash flow from operations. They should not be considered in isolation or as substitutes for a measure of performance prepared in accordance with United States generally accepted accounting principles.

Certain financial information in this presentation is also shown including Gas Marketing Services mark-to-market adjustments. This presentation is accompanied by a reconciliation of these non-GAAP financial measures to their nearest GAAP financial measures. Management uses the mark-to-market adjustments to better reflect Gas Marketing’s results on a basis that is more consistent withGas Marketing’s portfolio cash flows and to aid investor understanding. The adjustments reverse forward unrealized mark-to-market gains or losses from derivatives and add realized gains or losses from derivatives for which mark-to-market income has been previously recognized, with the effect that the resulting adjusted segment profit is presented as if mark-to-market accounting had never been applied to Gas Marketing Services’ derivatives. The measure is limited by the fact that it does not reflect potential unrealized future losses or gains on derivative contracts. However, management compensates for this limitation since derivativeassets and liabilities do reflect unrealized gains and losses of derivative contracts. Overall, management believes the mark-to-market adjustments provide an alternative measure that more closely matches realized cash flows for the Gas Marketing segment but does not substitute for actual cash flows. We also apply the mark-to-market adjustment and the recurring adjustments to present a measure referred to as recurring income from continuing operations after mark-to-market adjustments.


Non-GAAP Reconciliation Schedule

Non-GAAP Reconciliation

Reconciliation of Income (Loss) from Continuing Operations Attributable to The Williams Companies, Inc. to Recurring Earnings (UNAUDITED)

(D ll i illi h ) 1 Q 2 d Q 3 d Q 4 h Q Y 1 Q2008 2009

(Dollars in millions, except per-share amounts) 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year 1st Qtr

Income (loss) from continuing operations attributable to The Williams Companies, Inc. available to common stockholders 416$ 419$ 369$ 130$ 1,334$ (165)$

Income (loss) from continuing operations - diluted earnings per common share 0.70$ 0.70$ 0.62$ 0.23$ 2.26$ (0.29)$

Nonrecurring items:

Exploration & Production (E&P) Gain on sale of Peru interests (118)$ (30)$ -$ -$ (148)$ -$ Reserve for receivables from bankrupt counterparty - 5 4 - 9 - Impairments of property in the Arkoma basin - - 14 129 143 5 Accrual for Wyoming severance taxes - - - 34 34 - Penalties from early release of drilling rigs - - - - - 34

Total Exploration & Production nonrecurring items (118) (25) 18 163 38 39

Gas Pipeline Gain on sale of excess inventory gas - TGPL - (9) - - (9) - Gain on sale of certain south Texas assets - TGPL - - (10) - (10) -

Total Gas Pipeline nonrecurring items - (9) (10) - (19) -

Midstream Gas & Liquids (MGL) Impairment of Carbonate Trend pipeline - - - 6 6 - Involuntary conversion gain related to Ignacio gas processing plant - (3) (6) (3) (12) 1 Reserve for receivables from bankrupt counterparty - 1 - - 1 - Final earnout payment from 2005 Gulf Liquids asset sale - - (8) - (8) - Charges from Hurricanes Gustav & Ike - - 8 5 13 - Involuntary conversion gain from hurricane damage at Cameron - - - (5) (5) - Gulf Liquids litigation partial settlement - - - (32) (32) - Loss associated with Venezuela operations and investments - - - - - 371 Total Midstream Gas & Liquids nonrecurring items - (2) (6) (29) (37) 372 q g ( ) ( ) ( ) ( )

Nonrecurring items included in segment profit (loss) (118) (36) 2 134 (18) 411

Nonrecurring items below segment profit (loss) Interest related to Gulf Liquids litigation partial settlement - MGL - - - (11) (11) - Interest related to Wyoming severance taxes - E&P - - - 4 4 - Loss associated with Venezuela operations and investments - MGL & E&P - - - - - 15 Loss associated with Venezuela operations and investments attributable to noncontrolling interests - MGL - - - - - (69)

- - - (7) (7) (54)

T t l i it (118) (36) 2 127 (25) 357Total nonrecurring items (118) (36) 2 127 (25) 357 Tax effect for above items [1] (45) (14) 1 49 (9) 86 Adjustment for nonrecurring tax-related items - - - - - -

Recurring income from continuing operations available to common stockholders $ 343 $ 397 $ 370 $ 208 $ 1,318 $ 106

Recurring diluted earnings per common share 0.57$ 0.67$ 0.63$ 0.35$ 2.23$ 0.18$

Weighted-average shares - diluted (thousands) 598,627 596,187 589,138 587,057 592,719 579,495


[1] The tax effect for the first quarter of 2009 includes a benefit of $71 million related to Midstream's impairments and write-offs associated with Venezuela operations.

Note: The sum of earnings per share for the quarters may not equal the total earnings per share for the year due to changes in the weighted-average number of common shares outstanding.

Non-GAAP Reconciliation Schedule – Recurring Segment Profit


Reconciliation of Segment Profit (Loss) to Recurring Segment Profit (Loss)(UNAUDITED)

(Dollars in millions) 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year 1st Qtr

Segment profit (loss):

2008 2009

Exploration & Production 430$ 496$ 361$ (27)$ 1,260$ 78$ Gas Pipeline 180 179 173 157 689 179 Midstream Gas & Liquids 261 295 254 153 963 (291) Gas Marketing Services 21 (46) 16 12 3 (2) Other 1 (1) (2) (1) (3) 1

Total segment profit (loss) 893$ 923$ 802$ 294$ 2,912$ (35)$

Nonrecurring adjustments:

Exploration & Production (118)$ (25)$ 18$ 163$ 38$ 39$ Gas Pipeline - (9) (10) - (19) - Midstream Gas & Liquids - (2) (6) (29) (37) 372 Gas Marketing Services - - - - - - OtherOther - - - - - -

Total segment nonrecurring adjustments (118)$ (36)$ 2$ 134$ (18)$ 411$

Recurring segment profit (loss):

Exploration & Production 312$ 471$ 379$ 136$ 1,298$ 117$ Gas Pipeline 180 170 163 157 670 179 Midstream Gas & Liquids 261 293 248 124 926 81Midstream Gas & Liquids 261 293 248 124 926 81 Gas Marketing Services 21 (46) 16 12 3 (2) Other 1 (1) (2) (1) (3) 1

Total recurring segment profit 775$ 887$ 804$ 428$ 2,894$ 376$

Note: Segment profit (loss) includes equity earnings and income (loss) from investments reported in investing income (loss) in the Consolidated Statement of Operations. Equity earnings results from investments accounted for under the equity method. Income (loss) from investments results from the


management of certain equity investments.

Non-GAAP Reconciliation Schedule – EPS after MTM adjustment


Adjustment to remove MTM impactDollars in millions except per share amounts

20091Q

Recurring income from cont. ops available to common shareholders 106$ Recurring diluted earnings per common share 0.18$

Mark-to-Market (MTM) adjustments: 36 Tax effect of total MTM adjustments (14)

After tax MTM adjustments 22

Recurring income from cont. ops availableto common shareholders after MTM adjust. 128$ Recurring diluted earnings per share after MTM adj. 0.22$

weighted average shares - diluted (thousands) 579,495

20081Q1Q

Recurring income from cont. ops available to common shareholders 343$ Recurring diluted earnings per common share 0.57$

Mark-to-Market (MTM) adjustments: (3) Tax effect of total MTM adjustments 1

After tax MTM adjustments (2)

Recurring income from cont. ops availableto common shareholders after MTM adjust. 341$ Recurring diluted earnings per share after MTM adj. 0.57$


Notes: – All amounts attributable to Williams

weighted average shares - diluted (thousands) 598,627

1Q 2009 Segment Contribution


Dollars in millionsE&P Midstream Gas Pipeline Gas Marketing Other Total

Segment Profit 78$ (291)$ 179$ (2)$ 1$ (35)$ DD&A 219 61 83 - 4 367$ Segment Profit before DDA 297$ (230)$ 262$ (2)$ 5$ 332$ g ( ) ( )

General Corporate Expenses (40) Investing Loss* (9) Net Loss Attributable to Noncontrolling Interests 52 Other Loss (2)

TOTAL 333$

*Excluding equity earnings and loss from investments contained in segment profit


Notes: – All amounts attributable to Williams

2009 Forecast Guidance Contribution


Dollars in millions, except per-share amounts 2009

Income from Continuing Operations:N R i It (P t )

$49 – 289357

Dollars in millions, except per share amounts 2009

Non-Recurring Items (Pretax)Less TaxesNon-Recurring After Tax

35786

271Recurring Income from Cont. OpsRecurring EPS

Mark-to-Market Adjustment (Pretax)

320 – 560$0.53 – $0.93

20j ( )Less Taxes @ 39%Mark-to-Market Adjust. After Tax

Inc from Cont Ops after MTM Adj

812

332 572Inc. from Cont. Ops after MTM Adj.Inc. from Cont. Ops after MTM Adj. EPS

332 – 572$0.55 – $0.95


Note: – All amounts attributable to Williams

2009 Forecast Segment Contribution


Dollars in millions E&P Midstream Gas Pipeline Gas Mktg 1 Total

Reported Segment Profit $(40) – 0$630 – 670$236 – 411 $28 – 378 3 $894 – 1,419 2

DD&A

Seg. Profit Before DDA

0

$(40) – 0

325 – 345

$955 – 1,015

775 – 875

$1,011 – 1,286

230 – 240

$258 – 618

1,375 – 1,475 2

$2,269 – 2,894 2

General Corporate & Other

Net Income Attributable to Noncontrolling Interests

Rounding

(150) – (160)

(16) – (101)

(3) (8)Rounding

TOTAL

(3) – (8)

$2,100 – 2,625 2

1 Segment Profit is prior to MTM adjustments2 Sum of the ranges for the business units does not match the consolidated total due to the offsetting effect of natural gas prices within our business units3 Includes impairments and write-offs associated with Venezuelan operations of $370 millionAdditionally, corporate and other is not forecast separately but is included in the total guidance.


q1 2009 earning report of williams companies, inc

Economy & Finance

probable reserves

potential reserves

proved reserves

forwardlooking statements

future changes

future natural gas reserves

future events

reference statements